RestAssured

Thanks Bill and RatherBeReading.

Well, the 6 pages of notes is because I'm an over-thinker. 😂 Probably..... lol My confusion NOW comes from the actual IRS Form 5500 & 5500SF instructions! On Page 1 (sf), there is a note about the change in counting method. Awesome. But then on page 11 (SF instructions) on the right hand side under "for pension benefit plans"... it says about "participants": (formatting is my doing) "This includes any individuals who are eligible to elect to have the employer make payments under a Code section 401(k) qualified cash or deferred arrangement. Active participants also include any nonvested individuals who are earning or retaining credited service under the plan." Am I reading this wrong? Doesn't Page 11 mean I would include actively-employed participants with a zero balance by virtue of their not having made a 401(k) deferral and thus not receiving a SH Match?? That contradicts what Page 1 says, and what you and others have stated. Thanks for the discussion! Feel free to correct me, I'm not above being wrong! (Don't tell my husband)

Thank you for the reply Lou. Turns out, his balance had been sent to the Forfeiture account by mistake. The financial institution's mistake because of the way they showed his vesting. The details have become more 'involved', so I won't bore anyone with the details now. It's currently a battle between me and the financial institution about whether or not the vesting was correct in their system at time of original payout. It's not usually simple, is it?! But, if things were simple, I wouldn't have a career in this field! 😄

All of my clients have less than 50 employees, so the idea of an audit is not something I'm too familiar with. But I will be pitching my services to a new client soon (will be a takeover plan for me), and they have about 144 employees, 81 of whom are active (401(k) with match only, so if someone doesn't make deferral, they have $0 balance). Does someone have a checklist or yes/no flowchart they would share with me about determining whether or not an audit is necessary? I've started my own, and compiled 6 pages of my own typed notes, and I now feel like I may be over-complicating the matter. Reinventing the wheel, as it were. I started with "5500 vs 5500SF", and gone through Sch H & I of the 5500 further down in my flow chart. I appreciate any direction you can give - but please dumb it down 🤯 Thank you!

I agree with you about their not being able to see what he was invested in. 😂 Thanks Bill! I appreciate your replies.

Participant-directed accounts. The brokerage firm isn't able to see what this particular gentleman was invested in at that time.

Terminated participant, instructions sent to brokerage firm to pay out said participant. The payout didn't happen, and participant is asking for earnings on top of the original distribution amount. Is there a standard for how to calculate "lost earnings"? Should the brokerage firm have standards that would dictate this answer? Thanks all!

Thank you Paul! I appreciate your confirming what I thought to be ok per the instructions, and that's what I'm going to do!

"Basically Green" posted an almost-identical question in November, but I have a slightly different scenario. My question is 'basically' (sorry, couldn't resist:)) - does the Code "B" in Box 7 indicate that the entire cash-out distribution was Roth?? If no, then I can safely prepare the 1 1099-R to report everything at once. Right? Details: My participant, age 26, took a cash distribution of his Roth deferrals and ER contributions. He did not make the 5-year mark to maintain tax-favored status on the Roth portion. 20% was withheld from the taxable portion of his distribution. May I prepare 1 1099-R, showing the gross cash-out amount in Box 1, the non-Roth/taxable portion of the total in Box 2a, and list his Roth deferral amt in Box 5? The codes I would use in Box 7 are: 1 & B. Here are exact details: $1414.87 total cash-out. $539.94 pre-tax & $874.93 Roth deferrals from 2022 & 2023. $107.99 was withheld. This is 20% of pre-tax portion. I'd put $1,414.87 in Box 1, $539.94 in Box 2a, $874.93 in Box 5, and a 1 & B in Box 7. Thanks!

Basically, if you can account for the 2 money types separately, I think you're fine as far as plan qualification goes. Although, it may depend on the following question's answer - How many years has this cohabitation-of-monies been occurring? If not too many, shouldn't be hard to create a spreadsheet to separate the 2 year over year. I actually came to BL looking for an answer about the need to prepare 2 1099-Rs, and saw your other post about it. I may copy (with credit to you), but change the circumstance in my post, if you're ok with that. Thanks!! 😉

OH MY GOSH, it's like you know "me"! I save any hand-written 'love letter' I get from clients, including but not limited to Christmas cards This post made me laugh; glad it's not just I who am like this.

Messaged you privately.

Good morning! We have used Datair for almost 30 years now, and really like it. I can't speak on other software providers, but we are happy with Datair. Best of luck to you! Feel free to email me, or message me on BL directly.

Thanks again. The Trustee of the LP asset is not a regulated financial institution. : / Thanks Paul I, I spent hours scouring that instruction page this morning, along with the fed regulation involved. It's a little clearer to me now, ha ha. I think my client is able to waive the IQPA audit, if he increases his fidelity bond. I reaalllly hope I'm thinking correctly - I can't see how I'm wrong but there's a first time for everything. 😅

I appreciate it, Belgarath. You are right - I am trying to determine what situation constitutes having a IQPA in a small-plan. I think I'm making more sense of it all now.... gone through the instructions for Schedule I, line 4k. Please confirm that my understanding is correct (taken from Schedule I instructions for line 4k). A small plan is eligible for the waiver of the IQPA audit if: 1) at least 95% of the assets are "qualifying plan assets" OR the person handling said assets is bonded for at least the value of the NQAssets. and 2) The Summary Annual Report names the regulated financial institution(s) holding or issuing the qualifying plan assets & the value of those, names the surety company that issues the fidelity bond (if NQA are >5%), tells parts/benes they have the right to examine & receive copies of bond &/or statements (and that the parts/benes may contact EBSA if they aren't given access to those items). and 3) A participant or beneficiary may examine & receive copies of evidence of surety bond and/or financial institution statements of assets. My client's situation is that there are approximately 5 participants in the 401(k) PS Plan. Owner, his wife, and 3 ees. All segregated accounts with investment control. The owner's balance is just over a million dollars. He wishes to invest $1MM of his own balance in a real estate limited partnership. This investment is over 5% of the plan's total assets. According to my findings, if I'm correctly understanding them, my client can avoid a plan audit by increasing his fidelity bond to cover the $1mm non-qualifying plan asset. The SAR will be up to snuff, obviously. PLEASE tell me I'm right! Thanks 🤪

Can someone smarter than I explain the difference between "qualifying plan assets" and "eligible plan assets"?? I have highlighted until my pens are nubs, and I'm just going 'round and 'round with myself....

Thank you! Very helpful.... off to look at that now!

I'm moving this over to the "Plan Investments" forum....

Hi All. I have searched for my answer, to no 'recent' avail. I have a small business owner (himself, his wife, and 3 employees) in a 401(k) plan who would like to invest his balance in a Limited Partnership (which holds real estate). This group is already in segregated accounts, but the owner's investing of almost 100% of his own balance is still way more than 5% of plan assets. The plan would still need an independent audit, correct?? Obvious answer, I think. Besides this question, can someone please point me into some reliable source for learning more about question #6 a & b on the 5500SF - ineligible plan assets and the subsequent plan audit requirements? I greatly appreciate it.

Hi All. I have searched for my answer, to no 'recent' avail. I have a small business owner (himself, his wife, and 3 employees) in a 401(k) plan who would like to invest his balance in a Limited Partnership (which holds real estate). This group is already in segregated accounts, but the owner's investing of almost 100% of his own balance is still way more than 5% of plan assets. The plan would still need an independent audit, correct?? Obvious answer, I think. Besides this question, can someone please point me into some reliable source for learning more about question #6 a & b on the 5500SF - ineligible plan assets and the subsequent plan audit requirements? I greatly appreciate it.

Yeah, totally frustrating! Trust/Plan EIN's are more hassle than they're worth, in my opinion. I haven't obtained a Plan EIN in a decade or more. 😏 Only 2 of my clients received the Notice. One was legit (oops on client's part), and the other one was NOT legit so I sent a very nice letter to the IRS on behalf of my client. No updates on that yet.

Unbelievable! That one was 10 years ago! Uh, a little late to dig this up, even if it were legit! Curious - did they add on 10 years worth of penalties and interest?!? Crazy.

No updates, Tom. One of my 2 clients discovered their Notice was accurate - the office manager had failed to deposit 2 945 withholdings during 2021. But my other client absolutely made his deposits, and timely to boot. I will write a letter to the IRS, on behalf of my client, asking them to check their records again, and also supply them with all the data proving that these deposits were indeed made. I'd like to add other words to the letter, but I'll refrain. Ha ha.

I have had 2 different clients receive a Notice saying they did not deposit their 945 taxes timely. One for 2021 and one for 2022. The 2 different clients' letters are each dated Feb 20, 2023. Is anyone else seeing this? Just curious.

Sorry, just opened the link you posted Peter Gulia, and see 1(A)(ii) below. What is the definition of "account"? It's a money type within a qualified retirement plan, right? Like "Safe Harbor Non-Elective" or "Salary Deferrals" would be accounts? So even if a plan has ONLY a Pooled account in which all participants' assets are held, we have to furnish a LIS once per year? I think I just answered my question from a few minutes ago, but would appreciate a smarter person than I to confirm.